NEW DELHI - India will take six months to announce rules allowing companies to listed overseas, taking longer than some expected as the finance minister irons out issues related to taxation, two government officials and four industry sources told Reuters.
The delay is likely to dampen the hopes of investors like Tiger Global, Sequoia Capital, Lightspeed and many foreign startups who have urged Prime Minister Narendra Modi https: Reut.rs 3 AISors to swiftly announce rules governing Indian stocks that were given the go-ahead almost a year ago.
Two senior government officials said the rules would only be released with the February Federal Budget as there was no decision yet on how the government will tax big investors and retail traders when they trade Indian companies listed overseas.
A key concern is to ensure that big foreign investors pay equal long-term capital gains tax - roughly 10% - even if they exit an Indian company listed on foreign bourses like Nasdaq, said the six sources familiar with these private discussions.
Three industry sources said that to convince the Indian government, some investors, merchant banks and startups have suggested that an investor's exit from an India company may be taxed as per Indian laws, if an investor has a significant shareholding of 10-20%.
An senior government official said: We haven't decided a final decision yet or reached the structure We would want to get the tax if any investor exits, does not matter where it is planning to list.
Another concern the government was trying to address was whether it can garner tax from foreign retail investors trading in an Indian stock listed abroad, but has decided to exempt such transactions, said the two government officials.
The rules however will insist that Indian nationals with money making obligations from foreign trades abroad will be liable to pay tax as per local laws, they added.
The debate comes as local firms see better prospects that they can achieve big valuations with domestic listings following the stellar debut https: www.reuters.com technology ant-backed - zomato-jumps 53 - above-offer - price-India - market debut - 2021 - 07 - 23 on Indian bourses of the Ant Group-backed Indian food delivery firm Zomato valued at $13 billion.
Of course, many investors and startup want to take the option of local listing as they say companies get better access to capital and higher valuations. Some 22 investors and top Indian startups urged Modi in a July letter to expedite overseas listing rules, calling it an unfinished reform agenda.
Further delay in rules will hurt the startup ecosystem as many companies are at the bringe of deciding their foreign listing plans, said one venture capital industry source.
Its opponents include Swadeshi Jagran Manch - the ideological wing of Modi's ruling party. This fear is that such listings would mean less Indian regulatory oversight on domestic companies and could hit the growth ambitions of capital markets in India.
Investors if they only list abroad will not get same access to these companies, the group's co-convener Ashwani Mahajan told Reuters.